This is a key point when considering Tesla stock. In order to justify the current price, Tesla really has to become the next Toyota.

Volkswagen is an $85B auto maker and the second most valuable. Tesla is already a $60B auto maker. If Tesla becomes the next Volkswagen in 10 years, they will have gained 42% returns over 10 years or about 3.6% annual returns. Given the high risk that Tesla won't become the next Volkswagen, it seems over-priced.

Even Toyota, at $192B, seems like it would be lackluster returns if Tesla reaches their heights in a decade. That would be a 12.4% annualized return. Now, that's a very good return, but is is likely that Tesla will become the next Toyota? Why not the Next Volkswagen at $85B or Ford at $28B or GM at $51B or Mazda at $7B? Those are all successful auto makers with good profits.

Worse, are cars really the future? More and more people are migrating to cities and looking toward public transit. Even if cars become green, they're still congestion in a world whose urban population is increasing a lot where congestion and parking are becoming larger problems.

Even if cars are the future, will people own them? If self-driving cars become a reality, demand for vehicles could fall by 90%. Most cars are idle most of the time. If I can just get a self-driving taxi everywhere I need to go, it would be a fraction of the price of owning a vehicle since I would be sharing vehicles with many people. That would lower the demand for vehicles a lot. Even if Tesla became 100% of the auto industry, if that industry is a tiny fraction of the size today, it would really hurt Tesla's finances.

Really, I think there are two ways Tesla could hold up to its expectations. 1) Being more than a car company. Tesla might become big in other industries like solar power in addition to being a car company. They'd probably need more than just solar as an add-on, but there are markets out there. 2) Tesla's vertical integration works really well and beats out competitors. One thing to note about this: the vertical integration also exposes them to a lot of risk. When you have several outside companies creating the same component for you, if one doesn't deliver, you don't have to push back projects - you just buy from a different supplier. While you pay a mark-up, you also get different companies and teams working on the same problem to drive down price and drive up quality. It's certainly possible that Tesla will do excellently with their in-house components and keep that going for decades and it could provide them a strong price advantage against competitors.

Beyond the hype, I think it's feasible to believe that Tesla has a massive multi-year advantage that other car companies will be playing catchup to for a very long time.

Having the global manufacturing infrastructure of someone like Ford or VAG certainly seems like an advantage, but retrofitting that infrastructure to manufacture electric vehicles isn't exactly trivial or cheap. Then consider you also need to "retrofit" all of your people to figure out how to make electric vehicles (or hire new people). The platforms that worked for ICEs don't work for EVs. The electronics don't work. It requires a huge number of new parts. And the parts that stay the same might not be well-suited for EVs; ICE buyers, especially BMW, don't really care about fuel economy, but every EV buyer does care about range. That's a huge shift that affects every part; seats have to be lighter, made of different materials, you have to use more aluminum and carbon fiber in more expensive models, aerodynamics change, etc.

Then consider Tesla's massive lead in battery production which serves to drive down price and increase their technology lead.

Your greatly overstating Tesla's advantages. EV drivetrains aren't quite drop in replacements but they are close enough that the first modern commercial EVs... including Tesla...were simply converted ICE vehicles.

Also, Tesla doesn't make batteries, Panasonic does. Tesla just assembles them. Panasonic also sells batteries to Tesla's competition. And based on Tesla's past issues with paying vendors, if they miss even a single payment to Panasonic their supply advantage could disappear immediately.

Of course the first ones were converted ICE vehicles. I could take a lawnmover and make it electric, that doesn't mean it would feasibly compete with a true designed-from-scratch electric lawnmower.

Those first EVs designed like that sucked. Seriously. Horrible range. Bad part fit. The roadster in a Lotus body was a fast car with decent range, but it also weighed almost nothing, had two seats, and no storage capacity. Come on, you're smarter than to think that's a good argument.

Look at Audi and the e-tron. They're advertising "200+ miles of range", but the only real road test we've heard about so far had it below that, at closer to 175. Meanwhile, the Model X is getting up to 300. And, by the way, before you say it: Yes, the price on both of these is about the same, at the $80k mark.

Consider the Bolt. It's got a range of ~240mi. For roughly the same price (~$40k), a Model 3 will do 310, and it will do those miles with substantially better performance and AWD (and also not look like a squished minivan, beside the point).

Who else is there? The Leaf? Ford Focus Electric? BMW i3? Hilarious. I'm tired of this argument that "the traditional manufacturers will catch up." It's the same argument we were making 4 years ago, 2 years ago, 6 months ago, nothing has changed. They haven't caught up. It's seemingly increasingly likely that the 2021 model year cars might compete with what Tesla is putting out today, in 2018. What will Tesla have by then? Who's to say.

These companies aren't doomed; the car market is vastly large enough to have many many people competing. But Tesla is in a position today to be #1 for a very long time. Their valuation will level off to be more realistic as their revenue catches up with the hype.

For roughly the same price (~$40k), a Model 3 will do 310, and it will do those miles with substantially better performance and AWD (and also not look like a squished minivan, beside the point).

Categorically false, as the Model 3s do not currently sell for that amount with that range. Cheapest model 3 is $46k, without upgrades.

Can't find anything about the electric-only etron, which hasn't been released yet. The hybrid etron only has 16 miles of pure EV range. BMW's I3 is a superior riding experience, range and acceleration aside. Even the Leaf and Focus Electric are nicer to ride in. After the novelty of "Ludicrous" mode wears off, the actual driver experience matters most to most car buyers. Considering that most people don't have a 150-mile commute, the Model 3's only advantage is for the hypothetical holiday drive. Most people would just rather have a nicer car.

Tesla has 50% of the EV market share and is by far the leader in tech. I would love to see anything even close to the specs of the new roadster. Or honestly if any company has any plans for anything as good as the Model S that would be great.

And wouldn't 3 years away give Tesla a multi-year advantage, as claimed?

The only full electric car BMW currently produces is the wacky i3, which doesn't appeal to the average BMW buyer. For some reason all car manufacturers (except tsla) build really lame, goofy, small electric cars, why can't we just have a traditional luxury saloon?

The current 5 and 3-series are not offered in an full electric version. Which means that maybe, if we are lucky, there will be an all-electric 3/5 series in the next-generation (to be expected in 2021).

The i3 is one of the best interpretations of the electric car, although it I guess it has been surpassed by now by the likes of the Renault Zoe and Nissan Leaf.

The i3 is what you get when you build an electric car that is optimized towards what an electric drive is good at _right now_. Given the range problem of the current battery technology, a short range city car with minimized energy consumption is where the electric drive is best at showing off it's benefits.

The Tesla on the other hand is what you get when you brutally try to hammer the electric drive towards matching the range that people are used to. It's a heavy machine that uses most of it's energy to hauling around it's battery.

And while, as you can grasp from what I wrote, I really like the idea behind the i3, it's obvious that the Tesla approach turned out to be better. It leads to a more practical and competitive car that is easier to sell.

The story if BMW i is a bit sad, as things didn't turn out that well. The idea was to make purely electric vehicles and built them sustainably (the interior of the i3 is largely made from some kind tree leaves if memory serves me right) - but BMW quickly figured out that they can't sell enough of them. Which is why they switched their approach towards developing vehicles that can either be built with an electrical drive train or with a combustion engine.

They basically have Teslas problem in reverse: Tesla can't build their factories fast enough to meet the demand for their cars, BMW can't build demand for electric cars fast enough to fill the production capacity they have (3 million cars per year).

(This reads more pro BMW as I mean it - I don't wanna say what they do is the best they could, I don't know that - it's more meant to try to see their point of view to understand why they do what they do.)

The i3 is a really good car, I never said it's bad. It is (or was) also one of the very few proper electric city cars. Tesla has yet to make a decent small size city car. So I fully agree with your post.

It's just that I don't understand why BMW won't make their current lineup of luxury saloons and SUV's available in an all-electric version. It feels like they are missing the boat.

I really hope for them that the next-gen cars will have an electric version, or else they will stand to lose a large portion of the market they currently own.

This is something that also always boggled my mind. One of the most expensive parts on an electric car are the batteries. No matter how cheap you try to make your car, you'll be set back about 20k just with the batteries.

You can still go for the lower end if you sell based on the total monthly car costs. Many people see what they can afford based on the monthly loan payments rather than the total cost, and if they save more on fuel than what they pay extra on the loan, it's a good trade. But that doesn't work if the extra niceties push the loan value over that line.

Depends on the market. I live in the Netherlands (next to Germany) and even though NL is one of the most expensive countries to own a car, luxury german cars are very common here. So are Tesla's by the way.

I've never been to NL and never knew that it was expensive to own a car there. However, having learned that, I am certainly not surprised to also learn that many of the cars there are fancy and expensive. Wealthy people have more fancy and expensive cars than poor people. If none of the poor have cars, a greater portion of existing cars will be fancy and expensive. Singapore was the same, when I lived there. That isn't to say that all vehicles were luxury. Workmen still need work trucks, after all.

Just bought a new Model S 100D. Sat in other cars just for giggles (BMW 5 series, Mercedes E Class, Audi RS 3). Where else am I getting an electric car that holds two large Clek Fllo car seats, two adults, a full trunk of luggage, has 330 miles of range, does 0-60 in 3.6 seconds, and I can travel cross country effortlessly in? It doesn't exist besides a Tesla.

GM Supercruise is the only other thing on the market that is comparable, and with Nav on Autopilot I'd argue Tesla is a fair bit ahead.

Maybe they are not ahead of Waymo, but can you buy a Waymo? If not then when will you be able to?

There is Comma.ai which I am impressed with and think will be the general autonomous solution to many (most?) non-Tesla cars going forward, but their product at the moment is for hobbyists and not consumers.

Battery packs for EVs are expensive and heavy. And more complicated than people realise. They're not just big batteries. Making an electric car with decent range at an affordable price* is not easy at all. Tesla is closer than anyone else.

I can go to a dealer today and grab a Chevy Bolt for under $32k with no haggling with 238 mile range. Hyundai hasn't come out with US pricing for their Kona EV yet, but in Norway they're selling it for the equivalent of $40k with 258 mile range.

It certainly isn't trivial and Tesla has invested a good bit in EV technology, but it looks like rivals aren't that far behind.

I'm more concerned with what's available on the market, not whether or not it sells in enough quantity to offset R&D, etc. Tesla had it's first profitable quarter in what, 15 years? It might be premature to move the goalposts ;-).

The fact remains that both Chevy (or LG) and Hyundai clearly know how to make a battery that competes on price. Tesla doesn't have any magic technology, what they have is good marketing. They have a plausible shot at replacing BMW as the image car of choice for folks in the lower premium car range, which seems fairly lucrative. Not a bad niche to be in.

The Tesla 3 base model is not in production right now. Only the higher priced models are. I'm sure they'll eventually get to it, but you're comparing a model that is available to buy today with one which is not.

Some high demand cars sell over MSRP. Seeing deep discounts at the end of a model year is common when trying to shift inventory or when dealing with very high margin trim levels. Advertising 26% under MSRP for a base 2019 model in 2018 is a rather extreme case.

I looked at & test drove the Bolt before buying my Tesla. I kind of liked it, but I bought a Tesla instead. The two issues that pushed me to get a Tesla:

1) GM seem to go out of their way to make the Bolt seem cheap and unappealing. The seats in particular are too narrow and are uncomfortable. The car is wide enough to accommodate more comfortable seats, but they just decided to use the cheapest seats possible.

2) There is no DC fast charging network that the Bolt can use in the US.

Thanks to the supercharging network, I can (and have) take thousand mile road trips in my Tesla without worrying that I'll be able to find a place to charge in a reasonable amount of time.

With a Bolt, any trip approaching 1/2 the car's range (eg roughly 115mi) from home suddenly becomes an adventure where you have to look for slow level 2 chargers and be prepared to wait hours for your car to charge. The Chevy dealership where we drove the car had a charger, but it was ICE'd in by their inventory of giant gas guzzling SUVs. I imagined this scenario would be typical.

BMW's net profits just tanked 24% in Q3. Meanwhile, TSLA is producing margins that the legacy manufacturers can only dream of. They are making 20% on a Model 3 while the others are squeezing out a few hundred Euros in the non-luxury segment.

Also, TSLA's battery tech is years ahead while especially the German manufacturers have been putting their eggs mostly in the Diesel basket. But those have become increasingly hard to sell to the point where Porsche has abandoned that technology altogether, and others are likely to follow. These companies are the Palm, Blackberry and Nokia of the auto industry: They don't understand that the paradigm has shifted, and when they finally do, it will already be too late.

Elon Musk has said repeatedly that the energy side of the business will grow faster and exceed the size of its car business.

Many stockholders bet on this – given the multiyear advance over its competitors in both EV and battery production. They expect Tesla to combine the sales of a large car and truck manufacturer, but also of the equivalent of a global car dealer network, of an oil and gas company, a power distribution company, a roof manufacturer and installer, a P2P car renting company, an automated on-demand transportation & logistics company, etc.

(Side note: your profits for AAPL are way off, they should be around $58 billion)

This is an interesting comparison, but I don't think it is an applicable one.

Amazon and Apple run vastly different business, whereas BMW and Tesla compete entirely within the same market (even market segment).

Furthermore, Amazon is infamous for being an outlier with regards to profit reporting, but this was generally understood to be a financially engineered situation rather than a lack of success. If I recall correctly, in 2016 or so AWS became so successful that the profits it generated couldn't be engineered away anymore, hence why we're seeing billions of profits (after 20 or so years without them).

I don't know about "suspicious", but what exactly is the point? Tesla, whom many consider overvalued, has a higher market cap than BMW. So what? BMW makes more money, has higher revenues, produces more cars and has been in business way longer. Their sales have been growing for years. They deliver almost as many cars in a month as Tesla has in its entire existence.

So what is the main point? Only in Silicon Valley do people care about "valuation".

Tesla's high valuation represents the hopes for its future importance. So at this point you could say the market values Tesla's future as being more important than BMWs future. And if you are ecologically minded, thats interesting.

If you were truly ecologically minded, you'd cheer on all the automakers in their move to EVs, not one in specific with a microscopic market share. BMW has more potential to shift the landscape than Tesla.

I highly doubt the EV efforts would be nearly as far along as they are without Tesla, and the danger that the catch-up activity by other players dies down again if Tesla goes under is very real.
(until the Chinese manufacturers start tackling the European market, that is)

There is nothing better to put pressure on other manufacturers than a successful EV vendor.

Well thats true, I do want other automakers to follow. That's Tesla's stated mission actually - to accelerate the transition to sustainable transport. So perhaps this market valuation will give BMW a kick up the arse. BMW and all the other major carmakers are continually announcing how they're going to start producing loads of EVs blah blah, but its always still 'a few years away'. And seems to have been like that for a decade now. I think there is some sort of deadlock at the senior management level.

Also, Tesla's market share is no longer microscopic and the likelihood is its going to continue to grow. Thats the whole point of the market valuation that this conversation we're having is about.

Looks like they just posted a solid ~5% YoY growth for the last quarter, while TSLA posted ~125%. It's clearly an interesting difference. Valuation is the metric that summarizes all of the other metrics.

Valuation is NOT a representation of the future of even expected future of a company.

I could bet on Tesla and help its value rise just because I think tomorrow other people will bet on them and so the share will rise. I could bet on Tesla because I think Softbank has way too much money and will ensure I get an nice ROI soon. I could bet on Tesla because I just see that they've been growing and think it will keep going at the same pace without issue.

As long as you have people ready to buy at a higher price for whatever reason, the share will rise. And if people stop believing it will drop. Both regardless of the actual metrics behind. When Tesla gains or lose more than 10% IN A DAY, it's not because suddenly their metrics are 10% better or worse, it's just the mirror of the market's collective psychology.

While I don't disagree with you (are you not describing every bubble in history?), eventually the music will stop and any 'investor' should at least be making reasonably sure there is a seat nearby.
Tesla's jump on their earnings report was as I understand it, because they made a profit. I suppose you could make a case for that increasing the 'value' much more than 10%. (although I could also take it as a signal for the end of teslas growth phase, and mark it down.) Hopefully all the different opinions average out at 'the one true answer' (tm).

Imagine what their sales would be in the US if they were actually allowed to have dealerships! I'm quite amazed they've been doing as well as they have been with that huge barrier the other car companies don't have. Imagine if the other manufacturers had to deal with this: https://finance.yahoo.com/news/cant-buy-tesla-states-1613182...

That reputation came about due to their notorious review of the Nokia Lumia 900 in 2012. The reviewer gave it lower numerical scores than the iPhone on various factors like ergonomics and camera even though the review text didn't imply that it was lower quality.

That led to accusations of Apple bias, especially because of editor Topolsky's love of all things Apple back during his Engadget days.

It does seem to me there is a lot more competition just around the corner from Jaguar (iPace), Mercedes (EQ), Audi (e-tron), etc. I expect supply of all of these will be constrained to start with but Tesla isn't going to have the high end of the market to itself for much longer.

Tesla is the new status symbol. Tech is in today. If you are an elite business man and don't have the highend flagship phone, either pixel 3 or iphone XR etc... you are not respected. Similarly if you don't have the coolest and most high tech car (Tesla), you are not respected.

Interesting. I work in LA, and Tesla's are already passe in the entertainment, music, and sports industries. If you still drive a Tesla, it means you weren't on the waitlist for the Jaguar i-PACE. Executives are already bragging about preordering the Porsche Taycan.

Having ridden in every model Tesla and test-driven an i-PACE, Tesla should be terrified. The i-PACE doesn't have the range or acceleration of a Tesla, but everything else about the car--including, most importantly, ride comfort (this is LA, after all...0 to 60 speed is irrelevant in rush hour traffic)--is miles ahead of what Tesla can muster.

Doesn't matter all car companies are toast, car sales are falling, iPhones have eclipsed cars as a status symbol among young people. Many of my friends no longer have cars.

The ones successfully migrating to autopilot Uber style service have a bright future. Mercedes and BMW have the most successful in Germany (they merged their operations), so the real next decade competitor of BMW is Uber/Lyft not Tesla. I guess it depends on how good autopilots will be (and there are rumors Musk really wants to to move into that space and Tesla is the means to do that).

If Google and Apple and Amazon get into that space, I guess consumers would choose their service over a BMW/Mercedes company though - they have the better tech brand and people would rather get into a driverless Apple/Google product than BMW/Mercedes.

Most people in this thread write from a US centric view where people live a long way outside of cities so they can't imagine what's coming.

I think BMWs failures are the most significant part about it. They are still tainted by their emissions cheating scandal and accordingly viewed as shifty people who will sell you a car that isn't really accredited.

I would be overjoyed to see others entering the electric market at a broad scale but right now I haven't seen anything to give me confidence. They are trying luxury with a tarnished brand and even say stuff like electric cars will always be more expensive which is a clear lack of long term vision. Always is a very long time.

Even an absolute pessimist should say "probably not in our lifetime" because in the long run stored energy sources will either be best off unused for whatever reason or used up already there will come down two choices for storing energy from our actual power sources - fixing our own novel hydrocarbons or batteries. The one has a far higher storage efficiency and less overhead if we are stick even if we assume absolute stagnation in battery tech and thermodynamic limits in fuel efficiency.